We live in an era of fast technological advances which require a lot of computational power, so it is not surprising that expressions like “big data problem” become more and more used by businesses and people. The term “big data” typically describes the problems associated with storage, processing, and analysis of complex data sets. Just a quick fact: around 90% of existing data in the world has been generated over the last two years. It is quite straightforward that with such huge swaths of unstructured data growth and demand for its storage and processing, the data storage market is expected to proliferate in the future. In this article we are going to review and compare two of the largest companies which have challenged the big data storage problem with traditional solutions like flash memory and hard disks. These companies are Micron Technology Inc (NASDAQ:MU) and SanDisk Corporation (NASDAQ:SNDK), who are facing strong headwinds from cloud service providers these days.
Most investors don’t understand hedge funds and indicators that are based on hedge funds’ activity. They ignore hedge funds because of their recent poor performance in the bull market. Our research indicates that hedge funds partly underperformed because they aren’t 100% long. Hedge funds’ fees are also very large compared to the returns generated, which reduces the net returns delivered to investors. We uncovered through extensive research that historically, hedge funds’ long positions in certain stocks actually outperformed the market greatly, and it has held true to this day. For instance, the 15 most popular small-cap stocks among funds has beaten the S&P 500 Index by more than 85 percentage points since the end of August 2012. These stocks returned a cumulative of 145% vs. less than 60% for the S&P 500 Index (read the details). That’s why we believe investors should pay attention to what hedge funds are buying, particularly in the small-cap sector, rather than what their net returns are.
Micron Technology Inc (NASDAQ:MU) is a $25.98 billion market cap global leader and top performer in advanced semiconductor systems. However, as many of its industry peers, the company has been seriously hit by weakening demand. Its failure to meet recent quarterly earnings and revenue estimates undermined shareholders’ optimism and resulted in substantial capital losses of 24.58% on a year-to-date basis. Today the shares are traded at $24 and are very close to the 52-week low of $23.66. SanDisk Corporation (NASDAQ:SNDK) is about half the size of its opponent in terms of market cap, having a $13.17 billion value. SanDisk Corporation (NASDAQ:SNDK)’s shares have also struggled mightily of late, having lost 37.38% of their value over the last year and having broken through their 52-week low of $63.00. Nevertheless, SanDisk is almost 2.5 times more expensive than Micron on a P/E basis: 19.42 versus 7.37. Looking at the price-to-sales ratio, Micron allows the public to buy its stock at 2x times sales, while SanDisk is traded with a 1.59x multiple. From a fundamental perspective, Micron brings its investors 35.86% in return on equity versus the far inferior 12.50% that SanDisk does, though Micron is a bit more leveraged, doing its business with a 47.83% debt-to-equity ratio, while SanDisk has a 38.30% mark. Both companies have an adequate quick ratio, but again Micron shows better numbers: 1.76 compared to 1.35.
Insider activity in Micron was characterized by minor sales during the past three months. Brian Shirley, the vice president, sold 23.29% of his holdings equal to 89,750 shares in April. The second-largest disposal in terms of shares was completed by another vice president Scott Deboer on June 6, and it amounted to 39,087 shares. Executives at SanDisk performed several non-market acquisitions totaling 57,239 shares, by Michael Marks, Chenming C. Hu, and several other Independent Directors on June 18.
Using our extensive database of hedge funds, we can say that managers who keep Micron Technology Inc (NASDAQ:MU)’s shares in their portfolios were quite optimistic about its future performance. David Einhorn’s Greenlight Capital tops the list of the largest owners of Micron. Over the last quarter, his fund acquired another 8% of the company’s stock, ending up with 33.50 million shares valued at $910.20 million. Viking Global increased its position by 55%, finishing the first quarter of the year with 31.15 million shares valued at $844.99 million. It is interesting that among the top ten hedge funds with the largest stakes in Micron Technology Inc (NASDAQ:MU) from our database, none decided to cut their positions.
Hedge fund activity among the top shareholders of SanDisk Corporation (NASDAQ:SNDK) was rather more fractured. David Cohen and Harold Levy, the managers of Iridian Asset Management, increased their stake in SanDisk by 25%, becoming the largest holders of its shares in our database with 6.35 million units at $404.11 million. The opposite actions were taken by Michael Lowenstein’s Kensico Capital, and Jean-Marie Eveillard’s First Eagle Investment Management. The former reduced its position by 1%, ending up holding 6.27 million shares worth $399.17 million. The latter reduced its holdings in the portfolio to 1.97 million shares valued at $125.07 million.
Overall, the hedge fund managers seem to be more optimistic about Micron Technology Inc (NASDAQ:MU). In total, 100 funds were holding Micron’s shares by the end of the first quarter with a value of $6.96 billion after they added around 9.42% to their positions. SanDisk Corporation (NASDAQ:SNDK) can be found in the portfolios of 40 funds, who have decided to cut their positions during the first three months of the year by 24.82%, leaving some $1.35 billion of managed money in this stock.
While Mr. Market reacted negatively to the recent performance of both companies, Micron still has the reputation of being a global leader and top performer. As we see, Micron’s shares are relatively cheaper in terms of P/E, they are more attractive fundamentally, and the best money managers simply love this stock. So, basing on what we have discussed, we would suggest loading more money into Micron Technology Inc (NASDAQ:MU) rather than SanDisk Corporation (NASDAQ:SNDK), as the former offers much more attractive potential for share growth.
Winner: Micron (MU)
Disclosure: None
